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Accounting Fraud

This archive displays posts tagged as relevant to Accounting Fraud. You may also be interested in the following pages:

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May 3, 2019

New Hampshire-based GT Advanced Technologies, Inc. and its then-CEO Thomas Gutierrez have consented to entry of an order by the SEC finding that they publicly misrepresented the status of an agreement the company had with Apple to supply "sapphire glass" for iPhones, falsely stating that the company expected to hit performance targets under its agreement with Apple, securing funding from Apple and achieving sales projections.  In fact, the company had repeatedly failed to meet Apple's performance milestones and faced liability to repay more than $300 million that Apple had advanced to GT.  GT was also found to have misclassified this Apple debt in its financial reports.  GT later filed for bankruptcy protection.  The parties agreed to cease and desist from further violations, and Gutierrez agreed to pay a $140,000 monetary sanction.  SEC

April 25, 2019

Indianapolis-based trucking company Celadon Group, Inc., has agreed to pay $42.2 million in restitution to shareholders, $7 million of which will be credited to a disgorgement pursuant to agreement with the SEC, to settle allegations of accounting fraud.  Celadon was alleged to have avoided the recognition of $20 million in impairment charges and losses by recording a series of equipment trades as sales at inflated values.  Celadon management is further alleged to have falsely stated to its auditors that the equipment was sold at fair market value. Celadon has entered into a deferred prosecution agreement calling for specific compliance measures and cooperation in ongoing investigation of the accounting fraud.  SEC; DOJ; USAO SD IN

SEC and DOJ Charge former Roadrunner CFO with Accounting Fraud

Posted  04/5/19
Securities Exchange Commission Logo
On April 3, the SEC and DOJ both announced charges against Peter Armbruster, former CFO of Roadrunner Transportation Systems Inc., for allegedly participating in a securities and accounting fraud scheme that lost Roadrunner shareholders over $245 million. According to Assistant Attorney General Brian Benczkowski, Armbruster and his co-conspirators “used sham accounting entries, misstated accounts, and other means to...

March 11, 2019

Having been charged in January, 2018, the former national managing partner for audit quality at firm KPMG LLP, David Middendorf, was convicted after trial for scheming to acquire and use information from the Public Company Accounting Oversight Board (the “PCAOB”) about which KPMG audits the PCAOB would be reviewing in the upcoming year. The PCAOB, which is overseen by the SEC, inspects the largest U.S. accounting firms on an annual basis, choosing a subset of the firm's audits for close inspection. Middendorf and others at KPMG conspired with PCAOB employees including co-defendant Jeffrey Wada, to obtain PCAOB's plans for inspections of KPMG audits, enabling KPMG to analyze and revise audit workpapers in an effort to improve KPMG's performance in PCAOB inspections. USAO SDNY

Top Ten Federal Financial Fraud Recoveries of 2018

Posted  01/25/19
Wooden gavel and handcuffs on top of U.S. currency
While 2018 has been a banner year for FCPA, Tax, and SEC & CFTC recoveries, in the bottomless pit of financial frauds that hurt taxpayers, the government, consumers, investors, and the American economy, 2018 brought us additional stunning recoveries for violations related to residential-mortgage backed securities, international economic sanctions, consumer protection, anti-money-laundering, EB-5 investment fraud, and...

December 21, 2018

Audit firm Crowe LLP and associated individuals have settled SEC charges arising from significant failures in audits of Corporate Resource Services, Inc., which went bankrupt in 2015 following the disclosure of $100 million in unpaid payroll tax liabilities.  The SEC found that Crowe's audit team identified pervasive risks in its audit of Corporate Resource Services, but failed to take required steps in response.  Crowe will pay a penalty of $1.5 million and retain an independent compliance consultant.  SEC

World Conference of Accountants in Sydney Australia Discusses Whistleblowing

Posted  11/7/18
At the World Conference of Accountants in Sydney, Australia, Constantine Cannon partner Mary Inman led a discussion on "The Truth About Truth Telling.”  Inman and the panelists highlighted how accountants must sometimes make hard choices and blow the whistle to maintain a company’s integrity. Often reluctant heroes, whistleblowers play a critical role in protecting society from corporate wrongdoing.  However,...

September 25, 2018

Edward J. DiMaria, the former chief financial officer of Bankrate, Inc., a publicly traded company, plead guilty and was sentenced to ten years in prison for orchestrating an accounting and securities fraud scheme that caused more than $25 million in shareholder losses.  DiMaria admitted that between 2010 and 2014 he took actions to artificially inflate Bankrate’s earnings by leaving millions of dollars in unsupported expense accruals on Bankrate’s books, then selectively reversing those accruals in later quarters to boost earnings, as well as misrepresenting other company expenses.  DiMaria lied to Bankrate's independent auditors to conceal the fraud.  As a result of the accounting fraud, Bankrate’s financial statements filed with the SEC were materially misstated.  S.D. Fla. USAO; DOJ

July 2, 2018

The SEC charged global engineering and construction company KBR Inc. with inflating a key, non-financial statement performance metric known as work in backlog.  KBR agreed to pay a $2.5 million penalty to settle the SEC’s charges. According to the SEC’s order, KBR’s public disclosures of its work in “backlog” were important to investors because the metric was supposed to represent the amount of revenue that KBR expected to receive in the future from “firm orders” under previously awarded contracts. However, the SEC’s order found that in the second quarter of 2012, KBR improperly included $459 million in its publicly disclosed backlog for a pipe fabrication and modular assembly contract in Canada, even though KBR had not actually received - and the counterparty was not obligated to provide - any orders under the contract. SEC

June 28, 2018

Edward J. DiMaria pled guilty to multiple counts of corporate fraud related an accounting and securities fraud scheme that caused over $25 million in shareholder losses. DiMaria was the former CFO of Bankrate Inc. a financial services company that was formally headquartered in North Palm Beach, Florida. DiMaria inflated the company’s earnings that misled shareholders, auditors, and the SEC. DiMaria is required to pay $21 million in restitution to Bankrate shareholders. DOJ
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